Carmel Area Wastewater District/Pebble Beach Community Services District/Pebble Beach Company

WASTEWATER RECLAMATION PROJECT
MANAGEMENT COMMITTEE

MINUTES

Meeting of January 13, 2006
Pebble Beach Community Services District Boardroom
3101 Forest Lake Road, Pebble Beach, CA

 

1. Call to Order

Richard Andrews, PBCSD General Manager, serving as facilitator, called the meeting to order at 9:40 a.m. Members present were: Joyce S. Stevens and Charlotte F. Townsend, Carmel Area Wastewater District Board of Directors ("CAWD"); Dr. Gary D. Hornbuckle and Richard D. Verbanec, Pebble Beach Community Services District Board of Directors ("PBCSD"); and Mark Stilwell, Executive Vice President (arrived 9:50 a.m.) Pebble Beach Company ("PBCo").

Others in attendance:

George Thacher, Associate Legal Counsel, CAWD/PBCSD
Ray von Dohren, General Manager, CAWD
Barbara Buikema, Accountant/Controller, CAWD
Michael Niccum, P.E., District Engineer, PBCSD
Brent Reitz, P.E., Project Engineer, PBCo
Vinod Badani, P.E., Western Region Manager, E2 Consulting Engineers
David Berger, General Manager, Monterey Peninsula Water Management District ("MPWMD")
Thomas Peterson, Operations Superintendent, California-American Water ("Cal-Am")

2. Visitors, public comment and/or changes to the agenda:

There were no comments from visitors, and no changes to the agenda were requested.

3. Minutes:

It was moved by Charlotte Townsend, seconded by Joyce Stevens and carried, with Gary Hornbuckle abstaining, to approve the minutes of the Reclamation Management Committee meeting held on November 10, 2005, as submitted.

4. Operations & Maintenance of the Project:

4-A. Treatment Plant Operations & Maintenance ("O&M")

The Committee received a written report from CAWD Treatment Plant Superintendent, Mark Scheiter, dated January 9, 2006 regarding treatment plant operations for the period of November and December 2005. No unusual maintenance requirements were noted, Mr. von Dohren said that he did not have any comments to supplement the written report, and there were no comments from the Committee.

The written report regarding Treatment Plant O & M for November and December 2005 was received for information purposes and no action was required or taken by the Committee.

4-B. Distribution System O&M

PBCSD District Engineer, Michael Niccum, reviewed his written Distribution System Operations Report, dated January 13, 2006. Ms. Stevens asked Mr. Niccum to comment on the water demand being above the 11-year average. He said that while the total water demand was 12% above the project average it was not cause for concern as the total amount of water used was still not very much for this time of year. There were no other questions or comments from Committee members.

It was moved by Richard Verbanec, seconded by Gary Hornbuckle, and unanimously carried, that the Distribution System O & M Report for the period of November and December 2005 be received and filed for information.

4-C. Operation and Maintenance Financial Reports

Barbara Buikema reviewed her submitted Balance Sheet and Income and Expense Statement, including supporting schedules, for the period July 1, 2005 through November 30, 2005. She indicated that overall income and expenditures appeared to be satisfactory. Ms. Buikema then reviewed highlights of the financial statements. On page 5 she noted that total water sales revenue was above the amount budgeted for the period and that purchase of potable water was considerably lower than estimated in the budget for the period. On page 6 of the statements Ms. Buikema noted that salary operating expenditures were less than budgeted, and chemicals were higher than budgeted because of major one-time annual bulk purchases. In response to Ms. Townsend’s question about lower salary costs, Ms. Buikema indicated that the treatment plant operating requirements were minimal during the report period, and that there could be considerable variation in staffing requirements, depending on irrigation requirements. She said PBCSD distribution system operating costs were 62% under budget, which reflected some deferred maintenance that was planned to be done later in the budget year. Ms. Buikema said CAWD operating expenses, overall, were also under budget, primarily due to legal and insurance costs being considerably less than budgeted. She cautioned, however, that project liability insurance premiums could increase substantially within the next year or so. Ms. Buikema also called the Committee’s attention to page 14 of the statements, which she said included a tentative recap of expenditures from the escrow account for the Phase II or Expanded Project. She said the Escrow Account was established by the PBCo and was funded by revenue from the sale of PBCo water entitlements to Del Monte Forest residential property owners. Ms. Buikema said that as of November 30, 2005 PBCo had deposited into the Escrow Account $20.5 million and that PBCSD and CAWD had expended about $10.4 million of that amount for construction of Forest Lake Reservoir and planning and design of the advanced treatment facilities at CAWD. In response to Ms. Stevens’s question, Ms. Buikema clarified that about $8.6 million of the total expended was for the Forest Lake Reservoir construction project.

Returning to page 6 of the financial statements, Ms. Stevens asked if part of the reason for the apparent higher water sales revenue was due to some of the golf courses not having paid for the water on a timely basis in the past. Ms. Buikema said, yes, that had sometimes been the case in previous years.

Ms. Stevens asked if water requirements for the new Monterey Peninsula Country Club Shore Course should go down in the future. Dr. Hornbuckle said that as the past Shore Course should go down in the future. Dr. Hornbuckle said that as the past President of the MPCC he had been advised that as the new course gets established irrigation requirements should be expected to diminish, although he was not sure if that has happened yet. He explained that the reduced irrigation requirements relate primarily to the installation of a comprehensive system of under-drains and material that better absorbs water.

Upon completion of Ms. Buikema’s presentation, Richard Andrews advised the Management Committee that its Technical Advisory Committee had asked the Finance Officers Group to review and recommend methods and/or systems for expediting the MPWMD’s financial reporting of revenues to the lead agency, CAWD.

There were no further questions or comments from Committee members.

It was moved by Charlotte Townsend, seconded by Joyce Stevens and unanimously carried that the Reclamation Project Financial Statements for the period of July 1, 2005 through November 30, 2005 be accepted.

5. Status reports concerning Phase II (Expanded) Reclamation Project:

5-A. Advanced treatment facilities:

Mr. von Dohren reviewed his submitted written report concerning the status of the Phase II Salinity Management Project, also referred to as the "advanced treatment project". He noted that the status reports would be fairly routine for awhile during the current engineering planning stage. He said a number of technical issues are being reviewed and work is nearing completion on the environmental review. Mr. von Dohren said that on January 26 he planned to present to the CAWD Board of Directors an initial environmental study which would serve as the basis for a proposedand draft negative declaration of environmental impacts regarding the advanced treatment project. He said that, overall, the current planning for completion of the project in the fall of 2007.

In response to Dr. Hornbuckle’s question, Mr. von Dohren indicated that advanced treatment facilities would need to be constructed on piles to meet seismic requirements.because of the high water table in the area. He said that the matter of how deep and dense the piling should be is presently being studied by the project engineers. In response to Mark Stilwell’s question whether comments had been received from other agencies or the public in response to circulation of the environmental review documents, Mr. von Dohren indicated that the California Coastal Commission staff had advised CAWD that a coastal permit would be required. Mr. von Dohren said that the Coastal Commission staff is apparently linking the CAWD advanced treatment project to the PBCo’s Del Monte Forest Plan. Mr. Stilwell said PBCo is trying to clarify for the Coastal Commission that the advanced treatment project is independent of the DMF Plan and PBCo intends to provide financing for it in any event to meet current reclamation project improvement requirements. Mr. von Dohren has requested Coastal Commission staff judge the advanced treatment project as-is and not connect it to any development projects.

Mr. Stilwell reported good progress in negotiations with U.S. Filter to be the provider of desalination and micro-filtration equipment for the project.

There were no further questions or comments from Committee members.

It was moved by Gary Hornbuckle, seconded by Richard Verbanec and unanimously carried to accept and file the advanced treatment plant

Project status report.

5-B. Forest Lake Reservoir:

The Committee received and reviewed a written report dated January 13, 2006 from PBCSD District Engineer, Michael Niccum, regarding the status of construction of the Forest Lake Reservoir component of the Expanded Reclamation Project. Mr. Niccum orally reviewed his report and also narrated slides that depicted construction progress since the Committee last met in November 2005. He reported that Anderson Pacific Engineering Construction had continued to make good progress, including completion of the installation of the hypalon liner on the interior surface of the reservoir as well as progressing on the installation of mechanical equipment and systems. He said that the contractor had earned about $9.7 million or 85% of the revised construction contract amount of $11.4 million. Mr. Niccum said the completion schedule had been revised slightly and filling of the reservoir would begin in the third week of January. He said about 2 feet of water had been placed in the reservoir already in order to facilitate testing of the hypalon liner. Testing technicians have found some indications of about 20 possible weak areas in the liner that will probably need to be repaired or strengthened. In response to Dr. Hornbuckle’s request that he clarify the reference to "weak areas", Mr. Niccum said the inspectors employ electrical conductivity devices to test for holes or weak areas in the liner where an electrical current will penetrate the liner to ground the electrical current. He said the liner does not have to be leaking for a current to go through the liner, only that the liner may be thinner or weaker in certain locations. Besides any holes that may be discovered any liner weak spots will have to be repaired and strengthened. In response to Mr. Verbanec’s question whether the Division of Safety of Dams has concerns about placing water in the reservoir before it is completed, Mr. Niccum indicated DSOD is not concerned about the minimal 2 feet of water required for liner testing. In response to Ms. Stevens’ question, Mr. Niccum clarified that the hypalon liner is warrantiedguaranteed by the manufacturer for 30 years.

There were no further questions or comments and it was the consensus of the Committee to accept and file the status report regarding the Forest Lake Reservoir Project.

5-C. Implementing of Financial Plan

Mr. Stilwell provided an oral progress report regarding implementation of the financing plan for the Expanded Reclamation Project improvements. He said there was not much to report since the Committee’s last meeting in November. He said PBCo agreed one year ago to finance the improvements for the Expanded Reclamation Project no matter what the financial costs turn out to be. Mr. Stilwell said it was gratifying that some Forest property owners have already been able to put their water entitlements to beneficial use. He noted there have been no legal challenges to the sale of water entitlements and that the PBCo is now moving toward the 6th closing of water entitlement sales. He said the first closing was valued at about $10.0 million, and each succeeding closing has been of less value. However, Mr. Stilwell said the PBCo is still getting inquiries from potential buyers of water entitlements in the Forest. Overall, he said PBCo had sold about $21.7 million of water entitlements and it is estimated that the current cost estimate for all CAWD and PBCSD construction will be about $31.0 million. Nonetheless, Mr. Stilwell said the PBCo is committed to financing the additional required $9.0 million from PBCo financial resources if necessary.

It was also noted that total water entitlement sales were nearing 110 acre feet, which is about 6536 acre feet less than the maximum amount authorized by the MPWMD. Mr. Stilwell said there have been expressions of interest by parties outside of Pebble Beach. He noted that while the State Water Resources Board has authorized sale of PBCo water entitlements outside of the Forest in Cal-Am Water Company’s service area, parties other than PBCo would have to take the lead in securing approvals to sell those entitlements elsewhere. David Berger indicated that MPWMD would not lead in that regard either.

There were no questions, comments or action taken by the Committee.

6. Miscellaneous Information or Announcements from Members, Staff or Visitors:

Mr. Stilwell advised other members of the Committee that representatives from CAWD, PBCSD and the PBCo had been requested to provide a status report regarding the Expanded Reclamation Project to the Board of Directors of the MPWMD on January 26th.

David Berger reported an item to be listed on the MPWMD Board’s January 26th agenda would be an appeal by Stevenson School to be allowed to use part of its water entitlement for dormitory facilities. MPWMD staff has denied the request, as the use would not be strictly for residential purposes, which appears to be an unintended consequence of the definition of residential use in MPWMD’s Ordinance 109.

Ms. Stevens asked if any consideration is being given to a dedication ceremony for the Forest Lake Reservoir. Mr. Andrews responded that the Technical Advisory Committee had preliminarily discussed the matter and the consensus was to suggest a mid-summer or early fall date, after the reservoir has been fully operational for awhile.

Mr. Stilwell asked Mr. von Dohren to update the Committee regarding the CAWD / Cal-Am improvements to provide recycled water to the Carmel River Lagoon. Mr. von Dohren reported that a memorandum of understanding was nearly complete for the CAWD Board to consider. It would provide that Cal-Am contribute up to $75,000approximately $59,000 to assist CAWD in installing appropriate controls and pumps for diverting surplus recycled water to the lagoon.

In response to Mr. Stilwell’s question, Mr. Berger reported that a final decision in the Cal-Am rate case has been delayed, primarily due to California Public Utilities Commission Commissioner, Susan Kennedy, leaving the Commission to become the Governor’s Chief of Staff. Mr. Berger said that a tentative rate increase of 12% had been agreed to initially, but that additional unknown increments may be added for the coastal water project and the Los Padres Dam retrofit. Mr. Stilwell noted that whatever the increase turns out to be, it will impact the reclamation project by increasing water sales revenue, as recycled water must be sold at the same price as potable water. He said that the Independent Reclaimed Water Users Group had approached the PBCo suggesting PBCo consider joining the IRWUG as an intervener in the rate case. Mr. Stilwell said that PBCo did not wish to intervene in the case.

7. Closed Session

The Committee did not meet in a closed session.

8. Adjournment & Next Meeting Date:

There being no further business at 11:20 a.m., it was moved by Charlotte Townsend, seconded by Mark Stilwell, and unanimously carried to adjourn to Friday, March 17, 2006 at 9:30 a.m. in the PBCSD Boardroom at 3101 Forest Lake Road, Pebble Beach.

Respectfully submitted:
Richard Andrews
Board Secretary